India nominal GDP growth expected to surge to 12% in FY27, but broad stock market rally remains unlikely

India's nominal GDP growth is set to accelerate sharply to 11.5%–12% in fiscal year 27, up from approximately 9% in the prior year. Jefferies forecasts corporate earnings growth rising toward 14% in FY27 after reaching 10% last year. Earnings momentum has improved significantly, with companies excluding oil and gas showing 18% year-on-year growth in the June 2026 quarter. Despite this macroeconomic expansion, the firm warns that high valuations, increased equity supply, and potentially slower domestic capital inflows could limit overall market returns. Jefferies highlights specific sectors and stocks benefiting from these conditions. The brokerage assigns a potential 24% upside to HDFC Bank, 35% to Axis Bank, and 28% to State Bank of India. In the power sector, it projects 30% upside for NTPC, 49% for Adani Energy Solutions, and 39% for JSW Energy. Port and infrastructure companies face similar targets, with 31% potential upside for Adani Ports and 19% for JSW Infrastructure. For real estate, DLF and Godrej Properties are identified as top picks due to improved sales and valuations below long-term averages. While corporate earnings and GDP figures indicate a strengthening economy, Jefferies maintains that these factors may not be sufficient to trigger a broad-based stock market rally.